Mirae Asset-led funds on buying spree of overseas property, including Amazon HQ building in Seattle

  • 2016-06-15

A consortium of South Korean institutional investors, led by Mirae Asset Global Investments, has recently closed a deal worth about $245 million to buy the headquarters building of online retail giant Amazon in Seattle, indicating growing appetite for overseas real estate assets among Korean pension and savings funds.

Mirae Asset, a top mutual fund manager in South Korea, has been leading overseas property purchases which include a Hyatt hotel on Hawaii’s Waikiki Beach in a $780 million deal signed earlier this month. Armed with snowballing assets, South Korea’s institutional investors are not only diversifying their target regions from the United States into China, Vietnam, Brazil and Australia, but also chasing a broader range of assets from office buildings and logistics centers to hotels.

Mirae Asset Global Investments is a fund management unit of the Mirae Asset Financial Group, headed by a South Korea’s financial industry tycoon, Hyeon-joo Park. Once an employee of former Dongwon Securities, Park set up Mirae Asset Management in 1997 and made a huge success with the launch of South Korea’s first mutual fund in 1988. Also, Mirae Asset Securities, established in 1999, took over Daewoo Securities, South Korea’s No.2 brokerage company by equity capital, to become the country’s biggest securities house.

△Purchase of Amazon headquarters building that Amazon will lease for another 15 years

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Mirae Asset Global Investments said that a project fund has recently signed a contract to buy the building of Amazon HQ Phase Ⅷ in downtown Seattle for about $245 million from U.S. property investment firm Vulcan Real Estate. The fund, formed by Mirae Asset and participated by South Korean institutional investors including pension funds and savings funds, commit $110 million in equity investment to the property deal, with the balance of the acquisition price to be financed with secured loans from financial institutions in the United States. They target a return of the 6% level a year on the purchase.

The 12-story office building with four underground floors consists of eight buildings. Built at the end of last year, it is being used as one of Amazon’s global head offices and covers floor area of 317,804 square feet. The lease agreement with the world’s largest e-commerce provider Amazon will last for the next 15 years, raising the prospect of stable incomes from the office building.

It is the first office building that Mirae Asset Global Investments has ever purchased in the western U.S. The company has acquired four office buildings in the eastern U.S. including 2250 M Street, 1801 K Street building that has been rented out to the Federal Reserve Board (FRB), and 1750 K Street building, all located in Washington D.C.

△ On shopping spree of hotels including Waikiki Beach Hyatt Hotel

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Earlier this month, Mirae Asset had signed an agreement to buy Hyatt Regency Waikiki Beach Resort and Spa from the U.S. private equity firm Blackstone for $780 million.

The latest hotel purchase comes a year after it acquired the Fairmont Orchid in Hawaii’s Big Island in a deal worth 240 billion won. Since the acquisition of the luxury hotel in Hawaii last year, Mirae has seen strong growth potential in the hotel business in Hawaii.

Of the total price tag of $780 million, $380 will come from the Mirae Asset group’s affiliates such as Mirae Asset Daewoo and Mirae Asset Life as well as other domestic institutions (LPs), while the remaining $400 million from senior debts. Hyatt Hotels & Resorts will continue to manage the hotel.

The 40-story hexagon-shaped twin tower is located on Hawaii’s Waikiki Beach, with guestrooms of 1,230 and luxury amenities such as luxury spas within the hotel. It is just 10 minutes’ drive from Honolulu International Airport, the gateway of Hawaii.

The hotel on Waikiki Beach is also the seventh hotel that Mirae has purchased. Since it bought Four Seasons Hotel in Sydney for 380 billion won in 2013, the asset management firm has spent a total of 2.85 trillion won in hotel deals over the past three years. In 2015, Mirae bought Fairmont San Francisco Hotel, a landmark building in the city, for 520 billion won.

Park of the Mirae Asset Financial Group began investments in overseas property in 2006, with the purchase of a building in Shanghai, now called “Mirae Asset Tower in Shanghai”, just before the global financial crisis struck. Since the office building price in Shanghai soared more than four times as much as the original investment (260 billion won), Park had learned about the property value in China buoyed by the country’s rapid industrialization and growing middle class.

“The Chinese having a passport account for just 4% of the whole population (about 60 million people), but if the number increases to the level of developed countries (over 20%), luxury hotel demand from Chinese tourists will rise sharply,” Park had said.

As was seen in the investment in Shanghai where the rapid industrialization pushed real estate prices higher with the influx of people, Park pins hopes in growing overseas travels by the Chinese, which in turn would raise the value of luxury hotels in foreign tourist destinations.

 

By Chang Jae Yoo

yoocool@hankyung.com

<Edited by Yeonhee Kim>